Iron ore futures dipped on slower steel demand and high inventory among end-users.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange dipped down by 2.17% day-on-day to RMB 787.50 per tonne on Thursday.
The steel rebar contract on the Shanghai Futures Exchange was almost flat and dropped slightly by 0.28% day-on-day to RMB 3,612 per tonne.
More shipments from suppliers
The oversupplied market seemed to last for a while as iron ore producers were likely to increase their shipments bound for China in the Q4.
According to Kpler Research, Rio Tinto might beat market expectation with over 20% of its annual target of 324-334 million mt set for 2020, due to stable shipments in first half of the year.
Similarly, BHP is likely to reach its full-year guidance of 276-286 million mt for July 2020 through to June 2021, due to stable shipment and ramping up its output through its South Flank Project with capacity of 80 million mt per year.
However, Brazil’s Vale might struggle to maintain its iron ore output target for 2020 due to suspension of some mining operations like the Viga concentration plant that resulted in the loss of 340,000 mt per month in iron-ore fines production at the end of September.
The research firm stated that even though Vale has lowered its annual guidance to 310-330 million mt, but the miner still needs to deliver 96.8 million mt in Q4 to fulfill its target.
Automobile demand to the rescue
Despite slowing construction demand, China’s sales of automobile remained robust and lent support to steel consumption in near term.
According to China Association of Automobile Manufacturers (CAAM), China’s domestic auto sales rose by 12.8% on-year or 17.4% on-month to reach 2.6 million units, while production increased by 14.1% on year or 19.1% on month to 2.5 million units in September.
The rising auto sales were due to a series of stimulus policies and promotion activities such as the recent Beijing Auto Show that lifted automobile consumption.